Question 1

External users of accounting information make the strategic and operating decisions of a company.

Accepted Answer

A) True 
 B)False

Question 2

Match each of the following terms with the appropriate formulas.
-  Net sales  Average total assets \frac{	ext { Net sales }}{	ext { Average total assets }} Average total assets  Net sales ​

Accepted Answer

A)  Days' sales in inventory
B)  Dividend yield
C)  Total asset turnover
D)  Inventory turnover
E)  Return on common stockholders' equityF) Gross margin ratioG) Days' sales uncollectedH) Profit margin ratioI) Times interest earnedJ) Debt ratio K) G) and I)
L) C) and I)

Question 3

Gains and losses that are neither unusual nor infrequent are reported as:

Accepted Answer

A)  A prior period adjustment on the statement of retained earnings.
B)  A gain or loss from disposing of the discontinued segment's net assets.
C)  Part of continuing operations in before tax dollars.
D)  A gain or loss from operation of a discontinued segment.
E)  Part of continuing operations in after-tax dollars.F) A) and B)
G) B) and D)

Question 4

A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%.

Accepted Answer

A) True 
 B)False

Question 5

General-purpose financial statements include the (1)income statement, (2)balance sheet, (3)statement of stockholders' equity (or statement of retained earnings), (4)statement of cash flows, and (5)notes to these statements.

Accepted Answer

A) True 
 B)False

Question 6

Describe the purpose of vertical financial statement analysis and how it is applied.

Accepted Answer

Vertical analysis is used to evaluate in...

Question 7

A corporation reported cash of $27,000 and total assets of $461,000 on its balance sheet. Its common-size percent for cash equals:

Accepted Answer

A)  5.86%.
B)  1707%.
C)  100%.
D)  58.6%.
E)  17.1%.F) A) and B)
G) C) and D)

Question 8

Three of the most common tools of financial analysis are:

Accepted Answer

A)  Financial reporting, ratio analysis, vertical analysis.
B)  Horizontal analysis, vertical analysis, ratio analysis.
C)  Trend analysis, financial reporting, ratio analysis.
D)  Ratio analysis, horizontal analysis, financial reporting.
E)  Vertical analysis, political analysis, horizontal analysis.F) B) and E)
G) A) and C)

Question 9

General standards of comparisons, developed from experience, include the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.

Accepted Answer

A) True 
 B)False

Question 10

Industry standards for financial statement analysis:

Accepted Answer

A)  Are based on a single competitor's financial performance.
B)  Are set by the government.
C)  Are based on rules of thumb.
D)  Are available for the financial performance and condition of the company's industry.
E)  Compare a company's income with its prior year's income.F) A) and D)
G) B) and C)

Question 11

Match each of the following terms with the appropriate formulas.
- Cost of goods sold Average inventory \frac{	ext {Cost of goods sold }}{	ext {Average inventory }}Average inventory Cost of goods sold ​

Accepted Answer

A)  Days' sales in inventory
B)  Dividend yield
C)  Total asset turnover
D)  Inventory turnover
E)  Return on common stockholders' equityF) Gross margin ratioG) Days' sales uncollectedH) Profit margin ratioI) Times interest earnedJ) Debt ratio K) D) and H)
L) C) and H)

Question 12

Earnings per share are calculated only on income from continuing operations.

Accepted Answer

A) True 
 B)False

Question 13

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

Accepted Answer

A) True 
 B)False

Question 14

Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

Accepted Answer

A) True 
 B)False

Question 15

A good financial statement analysis report often includes the following sections: executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences.

Accepted Answer

A) True 
 B)False

Question 16

The measurement of key relations among financial statement items is known as:

Accepted Answer

A)  Horizontal analysis.
B)  Financial reporting.
C)  Investment analysis.
D)  Ratio analysis.
E)  Risk analysis.F) C) and E)
G) B) and D)

Question 17

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Accepted Answer

A) True 
 B)False

Question 18

Match each of the following terms with the appropriate formulas.
- Net income Net sales \frac{	ext {Net income }}{	ext {Net sales }}Net sales Net income ​

Accepted Answer

A)  Days' sales in inventory
B)  Dividend yield
C)  Total asset turnover
D)  Inventory turnover
E)  Return on common stockholders' equityF) Gross margin ratioG) Days' sales uncollectedH) Profit margin ratioI) Times interest earnedJ) Debt ratio K) B) and I)
L) C) and I)

Question 19

The evaluation of company performance and financial condition focuses solely on past performance.

Accepted Answer

A) True 
 B)False

Question 20

Carducci Corporation reported Net sales of $3.6 million and beginning Total assets of $0.9 million and ending Total assets of $1.3 million. The average Total asset amount is:

Accepted Answer

A)  $0.36 million.
B)  $2.3 million.
C)  $0.25 million.
D)  $2.7 million.
E)  $1.1 million.F) A) and B)
G) B) and D)

Exam 17: Analysis of Financial Statements

Describe the purpose of vertical financial statement analysis and how it is applied.

Correct AnswerverifiedVertical analysis is used to evaluate in...View AnswerShow Answer

Earnings per share are calculated only on income from continuing operations.

Correct AnswerverifiedShow Answer

A corporation reported cash of $27,000 and total assets of $461,000 on its balance sheet. Its common-size percent for cash equals:

Correct AnswerverifiedShow Answer

General-purpose financial statements include the (1)income statement, (2)balance sheet, (3)statement of stockholders' equity (or statement of retained earnings), (4)statement of cash flows, and (5)notes to these statements.

Correct AnswerverifiedShow Answer

Industry standards for financial statement analysis:

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate formulas. - Cost of goods sold Average inventory \frac{\text {Cost of goods sold }}{\text {Average inventory }}Average inventory Cost of goods sold ​

Correct AnswerverifiedShow Answer

A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%.

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate formulas. - Net sales Average total assets \frac{\text { Net sales }}{\text { Average total assets }} Average total assets Net sales ​

Correct AnswerverifiedShow Answer

Three of the most common tools of financial analysis are:

Correct AnswerverifiedShow Answer

A good financial statement analysis report often includes the following sections: executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences.

Correct AnswerverifiedShow Answer

Gains and losses that are neither unusual nor infrequent are reported as:

Correct AnswerverifiedShow Answer

The evaluation of company performance and financial condition focuses solely on past performance.

Correct AnswerverifiedShow Answer

The measurement of key relations among financial statement items is known as:

Correct AnswerverifiedShow Answer

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Correct AnswerverifiedShow Answer

External users of accounting information make the strategic and operating decisions of a company.

Correct AnswerverifiedShow Answer

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

Correct AnswerverifiedShow Answer

General standards of comparisons, developed from experience, include the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.

Correct AnswerverifiedShow Answer

Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

Correct AnswerverifiedShow Answer

Carducci Corporation reported Net sales of $3.6 million and beginning Total assets of $0.9 million and ending Total assets of $1.3 million. The average Total asset amount is:

Correct AnswerverifiedShow Answer

Match each of the following terms with the appropriate formulas. - Net income Net sales \frac{\text {Net income }}{\text {Net sales }}Net sales Net income ​

Correct AnswerverifiedShow Answer

Correct Answer
verified
Vertical analysis is used to evaluate in...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Match each of the following terms with the appropriate formulas. - $\frac{\text {Cost of goods sold }}{\text {Average inventory }}$

Correct Answer
verified

Correct Answer
verified

Match each of the following terms with the appropriate formulas. - $\frac{\text { Net sales }}{\text { Average total assets }}$

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Match each of the following terms with the appropriate formulas. - $\frac{\text {Net income }}{\text {Net sales }}$

Correct Answer
verified